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The Weekly Rap! Friday Oct 19, 2012

The Dow is currently trading at 13,372 higher by 34 pts over last week. The S&P 500 is trading higher at 1,436. Gold is trading at $1,719 an ounce, while oil futures at $90.07 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $4.29/Gal.

Yields on 10-year notes, which move inversely to prices, are trading at 1.76%. 30-year bond yields are trading at 2.94%. Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 106.72 experiencing a small correction. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.

In economic news this week; Apparently we ratcheted up our spending again in September, buying everything from back-to-school supplies to new autos to the latest version of the iPhone. Retail spending rose 1.1%. Sales were also revised higher for July and August. Consumer spending accounts for more than two-thirds of the U.S. economy, so the higher level of retail sales suggests the growth in third quarter could end up somewhat stronger than expected.

We also paid higher prices for goods and services in September, mainly because of the elevated cost of gas. The consumer price index jumped 0.6% in September for the second month in a row. That’s the biggest back-to-back increase in more than four years. Higher gas prices accounted for 70% of the increase in CPI in September. Inflation-adjusted wages dropped 0.3% in September and 0.6% in August, wiping out any improvement in workers’ earnings over the past year.

Builder confidence in October edged higher to mark the sixth gain in a row and the top reading in more than six years, in the latest indicator of a revival in the housing market. The National Association of Home Builders/Wells Fargo housing market index (Really? Naming rights to an index?) nudged up 1 point to 41, marking the highest level since June 2006. The index, as low as 17 in Oct. 2011, hasn’t reached the 50 level indicating more builders than not see good conditions.

Their confidence may not be through the roof, but builders broke new ground in September at the fastest pace in more than four years and permits also rose sharply in the strongest sign yet that recovery in the construction trade is becoming firmly entrenched. Construction on new homes accelerated by 15% to an annual rate of 872,000 last month.

Sales of existing homes declined 1.7% in September at 4.75 million from 4.83 million in August. The median existing-home price rose 11.3% from the prior year, the largest annual gain since November 2005. Although the number declined if you don’t have the houses to sell… Inventories declined 3.3% to 2.32 million units in September, representing 5.9 months of supply at the current sales rate, the first reading below six months since March 2006.

The number of Americans who applied for unemployment benefits last week shot up to a three-month high, reversing a sharp decline in the government’s prior report caused by a seasonal quirk that showed first-time claims at a four-year low. Didn’t I say last week that we would have a revision?